Correlation Between Seohee Construction and Seoam Machinery

Can any of the company-specific risk be diversified away by investing in both Seohee Construction and Seoam Machinery at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Seohee Construction and Seoam Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Seohee Construction Co and Seoam Machinery Industry, you can compare the effects of market volatilities on Seohee Construction and Seoam Machinery and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Seohee Construction with a short position of Seoam Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seohee Construction and Seoam Machinery.

Diversification Opportunities for Seohee Construction and Seoam Machinery

-0.42

Correlation Coefficient

Seohee Construction  Seoam Machinery

Very good diversification

The 3 months correlation between Seohee and Seoam is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Seohee Construction Co and Seoam Machinery Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoam Machinery Industry and Seohee Construction is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Seohee Construction Co are associated (or correlated) with Seoam Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoam Machinery Industry has no effect on the direction of Seohee Construction i.e., Seohee Construction and Seoam Machinery go up and down completely randomly.

Pair Corralation between Seohee Construction and Seoam Machinery

Assuming the 90 days trading horizon Seohee Construction is expected to generate 5.52 times less return on investment than Seoam Machinery. But when comparing it to its historical volatility, Seohee Construction Co is 1.01 times less risky than Seoam Machinery. It trades about 0.06 of its potential returns per unit of risk. Seoam Machinery Industry is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  337,152  in Seoam Machinery Industry on October 11, 2024 and sell it today you would earn a total of  42,348  from holding Seoam Machinery Industry or generate 12.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Seohee Construction Co  vs.  Seoam Machinery Industry

Seohee Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seohee Construction Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Seohee Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seoam Machinery Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoam Machinery Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seoam Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Seohee Construction and Seoam Machinery

The main advantage of trading using opposite Seohee Construction and Seoam Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seohee Construction position performs unexpectedly, Seoam Machinery can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Seoam Machinery will offset losses from the drop in Seoam Machinery's long position.

The idea behind Seohee Construction Co and Seoam Machinery Industry pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.